What does the pandemic mean for the economy?

Only two months have passed since the first Sars-CoV-2 infection was discovered in Europe but the virus has already caused major economic damage and brought radical changes to daily life. Governments are discussing appropriate aid packages and Eurobonds. The market cannot regulate itself in times of crisis, some argue. Others warn against protectionism or voice hopes for the creation of a whole new system.

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Die Presse (AT) /

Emergency nationalisations only with exit strategy

Die Presse sees emergency nationalisations as a sensible measure in the corona crisis but warns against an 'unplanned system change':

“The idea is not entirely new and in principle not entirely stupid either ... . But once a kind of corona trust has a large industrial portfolio stretching right across the vegetable patch, it's quite likely that politicians will acquire a taste for it and start playing the entrepreneur. In combination with the party book management appointments that are standard procedure in state-owned companies, this poses a serious risk for the entire economic sector and the wealth that is left over once coronavirus subsides. It is therefore important for the states to define truly binding exit scenarios in the upcoming wave of emergency nationalisations. Otherwise a few years from now we'll wake up in a 1950s and 1960s-style economy.”

Le Monde (FR) /

Central management needed in times of war

Commenting in Le Monde, economic expert Robert Boyer sees only one way out of the crisis:

“It's time for the state to coordinate economic cycles so as to deal quickly and efficiently with the healthcare emergency. It's necessary to take the metaphor of the 'war on the virus' seriously, and remember that the national accounts, macro-economic models and state economic plans that allowed the modernisation of the state were born out of the war effort and later the reconstruction - the interests of the collective were put before those of the individual via the requisitioning and control of credit and prices. It would be terribly naive to believe that the market can show us the way out of the crisis.”

Sega (BG) /

Coup de grâce for economic zombies

Sega predicts that the corona crisis will have a cathartic effect on the economy:

“It will be beneficial for a variety of processes that have been hampering economic development for years. For example zombie businesses: highly indebted, inefficient firms that exist only because of the central banks's low interest rates. Or the heavily indebted states which will be forced to take on even more debt in the crisis and sink even deeper into the debt swamp. ... Soon every debt-ridden state will have borrowed the last euro it is able to service, and the next one will be the straw that breaks the camel's back. Maybe this has already happened but no one has noticed yet.”

NV (UA) /

Boost state budgets!

Europe is sending the wrong signals again, writes former Greek finance minister and chairman of the left-wing MeRA25 party Yanis Varoufakis in NV:

“The financial aid package announced by the German government for the private sector is supposed to be a bazooka amounting to 550 billion euros according to the international press, but closer inspection reveals that it is nothing more than a toy water pistol. ... The German package, which defers tax payments and includes large credit lines, is proof that the nature of the current crisis has not been understood. This is exactly the kind of lacking comprehension that dramatically exacerbated the euro crisis ten years ago. Today, as then, the problem companies and households face is insolvency rather than lack of liquidity. Governments need to put all their energy and resources into boosting budgets to an extraordinary degree.”

La Repubblica (IT) /

Don't let companies determine policy

Economic expert Mariana Mazzuccato calls for a rethink in La Repubblica:

“Since the 1980s, the state has been told that it must take a back seat and leave it up to companies to create prosperity. ... With the result that governments are insufficiently equipped to deal with crises like Covid-19 or the climate emergency. The dominant role of the private sector in public life has also led to a loss of confidence in what the state can achieve on its own. ... We now have the opportunity to use the crisis to find new approaches to capitalism. Instead of simply correcting market failures when they occur, states should actively participate in shaping and creating markets that can generate sustainable and inclusive growth.”

Corriere del Ticino (CH) /

No protectionism now, please

The virus cannot be beaten with more protectionism, warns Corriere del Ticino:

“When this whole thing is over, it will have done a lot of damage, including economic damage. … At the same time, however, many of the elements that previously led to global growth of over three percent will remain intact. It is therefore wrong, both in principle and in fact, to ride the negative wave triggered by the virus and call for protectionist closures and denounce the development of world trade, which has brought many benefits. ... The current developments with coronavirus must make us stop and think and lead to the development of new preventive measures and structures in the medical and health sector. It would be a tremendous own goal to raise economic barriers now.”

The Irish Times (IE) /

Fresh start with a global currency

The Irish Times speculates that a completely new financial system may be needed for the world to recover from the consequences of the pandemic:

“Assuming the gravity of the situation forces politicians to come to a compromise, we could be looking at a brand new global reserve currency, which might be based on a basket of currencies including the yuan, euro and dollar. This new virtual unit of credit (eg the 'Globo' or the 'Mundo') could then put a worldwide value on all debts and assets. That could then restart supply and demand and might even lead to cash and coins being issued in the new clearing currency by a reconstituted IMF - one which the old western countries would no longer control.”

Der Standard (AT) /

Bring on the Eurobonds!

Unlike in the debt crisis of a few years ago, European bonds are now the means of choice, argues economics professor Paul Pichler in Der Standard:

“Each individual country profits enormously from the expensive health policy measures of its neighbours. ... It would be justified to socialise the costs of the corona crisis on a pan-European level. These enormous expenses could be financed by issuing pan-European bonds. Eurobonds were already discussed in the course of the European debt crisis, but were always rejected because of the inherent incentive problems for individual states. This argument is not relevant today: after all, the coronavirus was not caused by reckless behaviour on the part of politicians, and such behaviour will not lead to the emergence of viruses in the future either.”

Observador (PT) /

ECB must start distributing money now

In a manifesto published by Observador, thirteen economists call for quick and drastic measures from the EU:

“In order to make emergency financing possible, extraordinary funds are needed now, even if this requires corrections to EU legislation. ... In such exceptional situations the ECB must be authorised to finance such a programme, for example in the form of long-term and of course repayable loans (over 50 years) at very low interest rates (or even interest-free). ... Even drastic measures such as printing money to make it available to certain population groups and companies and the creation of Eurobonds must be seriously considered by the political authorities and the ECB.”

Dagens Nyheter (SE) /

Going it alone won't calm markets

Dagens Nyheter criticises the fact that each country is fighting the coronavirus crisis on its own:

“Politicians must recognise that we are not confronted with a 'foreign virus', as the US president called it, but are facing a common struggle. Joint efforts are needed to increase the production of medical equipment and materials, to maintain an international market for them, and to develop a vaccine against the virus. When world leaders show the world that they are working together to tackle the corona crisis, the markets will calm down. Only then will they actually have reason to do so.”

Der Nordschleswiger (DK) /

Every gesture from consumers counts

Many companies won't survive the corona crisis but there is an upside, the North Schleswiger believes:

“Business people are being creative in this emergency and are coming up with alternatives (takeaway instead of restaurants, online services instead of shopping). And for their part many customers are supporting companies: when a local gym offers to give members financial compensation many are saying that they want to continue paying - even if they don't get anything for their money. You want to be able to return to an open gym at some point and not be confronted with closed doors. Not all companies can be helped - neither with nice customers nor with multibillion-dollar subsidies. But you can do your bit where you can. As with the fight against the virus, every small step, every small effort, every small measure and every small gesture counts.”